Best Practices For Innovation - .microsoft
Best Practicesfor Innovation:Microsoft’s Innovation Management FrameworkJune 2013
Table of ContentsIntroducing the Innovation Management Framework 3The Business Imperative of Innovation 5Innovation Challenges and Best Practices (Solutions) 6Organization and Culture. 6Processes for Innovation Management . 6Envision . 7Engage . 7Evolve . 8Evaluate . 9Execute .10Case Study 12Ericsson.12Enabling Technologies for Innovation Management 15The Microsoft DIRA Framework 15Microsoft Technologies for Managing Innovation 16Getting Started: Transforming the Enterprise for Innovation 19Microsoft Partner Solutions Enabling Innovation Management 20NewsGator.20PTC .21QuantumPM .22Siemens PLM Software .23Sopheon Corporation .24Microsoft Implementation Partners Enabling Innovation 25Avanade .25Capgemini .26Pcubed .27UMT .28For More Information on Microsoft’s Innovation Management Framework 29Acknowledgements 30 2013 Microsoft Corporation. All rights reserved.Microsoft’s Innovation Management Framework Page 2
Introducing the InnovationManagement FrameworkInnovation is one of the primary drivers for growth and profitability in business today, sitting at the top of manycorporate agendas. Why? Companies have recognized that efficiency and world-class operational performance aloneare not enough to create sustained competitive differentiation and advantage in today’s challenging, global markets.Instead, consumers and businesses alike reward innovation.So how can companies improve innovation? Clearly innovation is highly dependent on corporate culture and thepeople involved. But innovation is also a process that can be managed and improved. Leading companies nowrecognize that structured innovation management approaches help them get the most out of the innovative potentialof their people, customers, and partners.Improving innovation starts with a strategy. The innovation strategy should address culture, processes, and enablingtechnology in a holistic way. Microsoft’s Innovation Management Framework is designed to help companies developa comprehensive, integrated approach to implement and support an innovation management strategy. Thisframework is a repeatable reference architecture for innovation and is intended to allow companies to share and learnabout innovation management best practices and enabling technologies as a starting point for strategic discussionsfor their company’s innovation management strategy.The framework includes best practice processes and solutions that offer a strategic roadmap. The roadmap offerstechniques that are proven through experience to improve innovation and innovation management performance. Forexample, the framework shares lessons learned from Microsoft’s own innovation strategies and processes that helpfuel innovation across the Microsoft enterprise. These processes are used within Microsoft, enabling teams to quicklyimplement innovation programs that are fit for purpose. The framework shares Microsoft’s experience as an innovatorincluding lessons learned and expertise on innovation, including the Thinkweek process instituted by Bill Gates.The framework also provides a technology roadmap to enable Innovation Management. The solutions identifiedinclude Microsoft technologies, services and partner solutions as well as Microsoft’s SharePoint Server 2010 andProject Server 2010 based solution for facilitating innovation within the enterprise and beyond, referred to as“Innovation Hub”. The framework also shares valuable insight gained from Microsoft’s internal deployment theInnovation Hub. (See diagram 1).Diagram 1: Microsoft Innovation HubMicrosoft is not alone in developing this framework. Microsoft has collaborated with a consortium of visionaries andpractitioners to ensure that the framework incorporates thought leadership on innovation from Microsoft and the 2013 Microsoft Corporation. All rights reserved.Microsoft’s Innovation Management Framework Page 3
Microsoft ecosystem. The framework will continuously evolve through the generous contributions of industry thoughtleaders and partners who are offering their time and expertise. Microsoft serves as a steward of these best practicescontributed by Microsoft and Microsoft’s ecosystem. Independent research firm Tech-Clarity is a consortium memberand advisor, and is playing an active role in developing and managing the framework.Current charter members of the consortium and contributors to this framework include: 3M Avanade Capgemini Ericsson Business Strategy Innovation Microsoft Pcubed PTC Quantum PM Siemens PLM Sopheon Tech-Clarity UMT United Healthcare Wolters KluwerThe framework will include case studies from companies that have successfully addressed the challenges ofinnovation management. If you would like to contribute to this framework, please contact Simon Floyd of Microsoft atinnmgt@microsoft.com. 2013 Microsoft Corporation. All rights reserved.Microsoft’s Innovation Management Framework Page 4
The Business Imperative ofInnovationFor the purposes of this framework, Microsoft defines innovation as “the conversion of knowledge and ideas intonew or improved products, processes, or services to gain a competitive advantage.” It’s important to note thatthis definition applies to different forms of innovation including business model innovation, process innovation,service innovation, and product innovation (among others). In fact, innovation is often applied to cost reduction andoperational improvement in addition to targeting top-line growth.As mentioned in the introduction, innovation is on the corporate agenda for many companies today. One reason isthat innovation has become a way to differentiate and compete for scarce demand, particularly during the recentslowdown. “Industries are being commoditized at a faster rate and you have to look for ways to create morevalue and set yourself apart,” says Braden Kelley of Business Strategy Innovation. “Innovation is one of the fewways to do that because people use the same best practices for operational excellence. The way they innovateand the culture they build are the ways they can differentiate.” The rapidity at which products are commoditizedis a real challenge for companies today because the innovation advantage just doesn’t last as long as it used to.Most companies today realize they can’t simply cost-cut their way to growth anymore. Now they are turning toinnovation because they have exhausted the value they can achieve through operational efficiency. On the otherhand, innovation promises top line growth, higher margins, increased market share, and greater market relevance.But companies should realize that improving innovation isn’t going to happen by simply investing more money inresearch and development (R&D). You can’t buy innovation by throwing money into new product development(NPD). Innovation requires a more strategic approach. The facts back this up. According to Accenture’s The InnovationDeath Spiral, a study on innovation found that there is little correlation between R&D spending and revenue growth.To make tangible improvements, companies need to develop an innovation strategy and recognize that improvinginnovation requires transformation of the organization, culture, and business processes of the business. 2013 Microsoft Corporation. All rights reserved.Microsoft’s Innovation Management Framework Page 5
Innovation Challenges and BestPractices (Solutions)Organization and CultureWhen speaking about innovation it quickly becomes clear that leadership, commitment and culture count. Whilestrategy, processes and technology play a large role, people matter. To start, let’s discuss leadership. Having strongleadership for innovation is crucial. In fact, many companies are putting in place executive-level positions responsiblefor innovation.Accenture’s Overcoming Barriers to Innovation shows that organizations with a single point of accountability forinnovation reported higher innovation performance and capabilities as compared with their peers at a ratio of two toone. Perhaps this explains the significant growth in companies reporting they have a formally accountable innovationexecutive in place, growing from 33% to 43% from 2011 to 2012 according to the Capgemini study.These leaders are responsible for building a culture for innovation. Dave Frazee of 3M frequently cites the PeterDrucker quote when speaking of innovation; “Culture eats strategy for lunch.” This is particularly true for innovation.Working on corporate culture for innovation has many facets. Addressing recognition and rewards are a given. But asuccessful innovation culture also instills an acceptance towards innovation risk to reward successful innovation butbe sure not to punish risk taking and failure.Processes for Innovation ManagementWhy should companies adopt standard practices for innovation? There are some people that believe innovation issimply the inspiration of a few talented, highly creative individuals. This simply does not scale at an enterprise level.While people are critical, harnessing the innovative potential of an organization requires process in addition to cultureand strategy. “Some might think that ‘innovation process’ is an oxymoron, but you need a fairly structuredprocess to drive innovation or you have little chance of collecting great ideas and no chance at bringing themto market,” explains Ben Chamberlain of UMT. He also adds, however, that the process should be fairly light to notinhibit innovation.As more CEOs realize that they lack an organizational competency for innovation, innovation is evolving into amainstream management competency and discipline. The bottom line is that formalizing innovation processesimproves business value. A benchmark conducted by Jim Brown of Tech-Clarity when he was with Aberdeen Groupreported that best-in-class companies are more likely to have implemented a predictable, repeatable innovationprocess. Capgemini’s Innovation Leadership Study finds a correlation between formalized innovation governance andinnovation success rate, implying that there is much to gain by improving the formal mechanisms for managinginnovation.The Microsoft Innovation Management framework identifies five primary sub-processes to innovation – Envision,Engage, Evolve, Evaluate, and Execute (see diagram 4). The processes represent an iterative cycle as products andbusiness models are continuously innovated upon during their lifecycles and leading companies attempt to “close theloop” on innovation by providing feedback from existing products and services into the beginning of the innovationcycle. 2013 Microsoft Corporation. All rights reserved.Microsoft’s Innovation Management Framework Page 6
Diagram 2: The Five Sub-processes for Innovation ManagementEnvisionThe first sub-process, “Envision,” is a critical step in the Innovation Management process. Innovation is critical toachieving the goals of the modern business strategy. Accenture’s Overcoming Barriers to Innovation reports thatmore than 60 percent of companies indicate that their organization’s strategy is either totally or largely dependent oninnovation. The Envision process should put in place the strategy and plan to achieve the innovation goals in thebusiness strategy. Despite the importance of the innovation strategy, Capgemini Consulting Innovation LeadershipStudy indicates that only 42 percent of companies have an explicit innovation strategy. This is a common failing andshould be addressed by corporate leadership.The innovation strategy starts right below the corporate strategy, taking growth targets and business goals from thebusiness planning process to drive acquisition, IT, and product strategies. The innovation strategy should includehigh-level goals, high level areas to be funded for innovation and in turn should drive ideation and portfoliomanagement processes. The strategy may also call out new innovation approaches or processes such as co-creation,open innovation, or others. These new collaborative, social approaches are starting to prove significant value ininnovation.EngageThe second sub-process, “Engage,” is the front end of innovation where ideas are generated, sometimes referred to as“ideation.” In this process, companies engage employees, customers, and partners in an innovation community tocapture and share new ideas. Formalizing engagement transforms it from a passive, unfocused, ineffective“suggestion box” to a proactive approach that effectively produces targeted ideas. The goal is to generate ideas thatwill drive new business value. As Braden Kelley of Business Strategy Innovation explains, “The key in the engageprocesses is to get closer to the customer, what they desire, how they will make their lives better, and how yourproduct will displace something.”One of the difficulties companies face in the Engage process is generating the right kind of ideas. Without the abilityto develop truly innovative ideas, companies will continue to suffer from too many “me too” products, minor productenhancements, and line extensions instead of breakthroughs that drive higher margins and growth. It surprises somepeople to find out that most companies don’t suffer from too few ideas. Instead, they are frequently inundated with 2013 Microsoft Corporation. All rights reserved.Microsoft’s Innovation Management Framework Page 7
too many ideas and don’t have a process to effectively capture and address them. Because of this they find it veryhard to identify the compelling ideas. What can companies do in order to generate high-value ideas? Develop a digital innovation environment, such as Microsoft’s Innovation Hub, to systematically captureideas and manage themMake it personal, brand the innovation environment with your company’s identity and terminology,Don’t start with a blank piece of paper, pre-populate the process with some ideas to provide examples andget people startedConsider using low-touch mediums such as handwriting, voice and video to collect ideas, and allowcontributions of rich information to support ideas (for example as document, picture, or video attachments)Don’t rely entirely on virtual events, you may need to include some physical events to move things alongDevelop profiles, capabilities, and communities to provide access to expertise and the ability to discover newinnovations (and new people to collaborate with)Evaluate the opportunity to collect ideas automatically, for example collecting and mining “big data” fromsocial media to gain insight and discover trends about customers and productsAnother common challenge in the Engage process is that too many of the ideas are off-strategy for the business. Agreat idea for a product that doesn’t fit within the corporate strategy is unlikely to succeed and generate value for thebusiness. “Suggestion boxes don’t work because the ideas aren’t focused,” explains Joe Boggio of Capgemini. Howcan companies focus innovation efforts? Create targeted “challenges” that specify a specific problem to solve or issue to addressCreate specific hubs for different communities and to solicit ideas for a particular kind of problem, productline, or market segmentConstrain ideas to a limited number of categories or strategies to allow people to get started and ensureideas are on strategyAnother frequent challenge companies face when implementing an innovation process is developing communitiesand getting people to participate. Or, perhaps even harder, getting people to continue to participate over time. “Oneof the biggest challenges is effectively marketing the innovation campaign to drive adoption. A comprehensivechange enablement plan was key, and we needed to start early to generate interest and communicate thatthere was incentive to participate,” describes Jeff Cohen of Avanade. How can companies motivate their employees,partners, and customers to participate in the Engage process and contribute their innovative ideas? Market the innovation environment through digital outreach and internal campaigns, for example with socialtechniques, newsletters, and/or emailShow clear sponsorship from senior managementMake it clear and very simple for people to participate and submit ideasLeverage the science of competition to foster engagement, identifying and rewarding those that contributethe top ideasTime box challenges to provide people incentive to actOffer clear visibility to how ideas progress and provide feedback, avoid the appearance of a “black box”where ideas go in but nothing happensProvide visible, social recognition to those that participateMake ideas visible and accessible so you can get thought leaders involved with them and build a communityof interest around them.Allow people to comment on and discuss ideas, using online collaboration to enhance ideasAllow people to link or combine ideasIncorporate innovation into job descriptions and track metrics on participationEvolveThe third process, “Evolve,” takes the output of the Engage process to the next level. In this process, companies evolveideas– as individuals or as teams – to increase their quality and value. Soliciting and capturing ideas is not enough. 2013 Microsoft Corporation. All rights reserved.Microsoft’s Innovation Management Framework Page 8
Early feedback allows great ideas to be improved upon and issues to be raised so they can be resolved (if possible).Today, companies can get unprecedented input and feedback on ideas early in the product lifecycle. This input canspan globally dispersed teams, departments, and even company boundaries. As David Blair of PTC suggests, “Givepeople a voice to exchange information, add comments, and refine ideas. How does somebody on the shopfloor or a design shop overseas contribute?”One of the biggest fallacies of innovation management is that having a good idea is enough to ensure success. Mostideas serve as the seed from which a fully formed innovation grows. In order to get the most out of ideas, they needto mature. Developing them in a virtual team setting provides the medium to bring group-knowledge together andshare it with subject matter experts, communities of interest, and others by discussing, commenting and contributingto concepts, which enhances their value through the power of collaboration. This is the way to get the most valuefrom ideas. It is also a powerful way to identify initially compelling ideas that will fail to impress or recognize when thecompany is going down the same path they have before and should take advantage of past experience.While the ultimate goal is typically to develop a specific innovation, companies can gain value by developing insightsinto their organization (sentiment), gathering trend information from customers, creating validated proposals forprojects, or other valuable information that helps them meet their innovation objectives. What can companies do tofurther develop concepts and increase their value? Facilitate collaborative development of ideas to mature their definition and further explore their validity.Encourage people to test ideas, do small experiments to test their worthiness, or engage in some virtualprototyping or simulation to gain information and get feedbackProvide a framework to capture and manage the important knowledge generated through collaborationIdentify and secure intellectual property to increase its suitability for protectionEvaluateSimply discussing ideas is not enough. “It’s important to be able to organize, de-duplicate, and merge ideas andtake them to the next step in order to turn ideas into money,” offers Newsgator’s Markus von Aschoff. At somepoint companies must identify the innovations they believe are candidates for further investment. Unfortunately,many companies are drowning in too many ideas. They want to use the “wisdom of the crowd” to provide somedirection on where to focus. The goal is to take potentially thousands of ideas and turn them into a more reasonablenumber that you can evaluate. How can companies identify the top candidates? Social metrics from the Engage subprocess can be used to create a first-cut view of potential innovations. Social techniques can help prioritize a morereasonable number of candidate ideas to evaluate. Provide filtering and search mechanisms so people can identify ideas that address their areas of interestTrack which ideas are getting the most attention, views, and commentsProvide mechanisms for the community to rate the ideas, from a simple “like” to providing specific feedbackor validation on details like technical feasibilityConsider weighting the remarks and attention of those with a greater expertise or “social reputation” morehighlyProvide a secondary review process where a panel of experts can provide more detailed feedback and beginto develop the elements of a business case for those ideas that show the most promiseAfter selected ideas have been matured and narrowed down in an initial evaluation they may re-enter the Evolve subprocess for further definition and clarification, written specification, or mockup. Then they are ready to enter thesecond stage of the “Evaluate” sub-process to determine if they are worthy of a full business case. Ideas may iteratethrough multiple steps between the Evolve and Evaluate sub-processes until the ideas are mature enough to becomea portfolio of potential products or projects that can be evaluated to determine the best mix of investments. If theprevious processes are executed effectively then one of the most common challenges – too much incrementalenhancement and not enough breakthrough innovation – should be alleviated with a collection of high value 2013 Microsoft Corporation. All rights reserved.Microsoft’s Innovation Management Framework Page 9
candidates. These ideas may include new products, but also new business model ideas, opportunities to enhancecustomer experience, operational improvements and process innovations.The biggest challenge companies face when evaluating a portfolio of ideas is providing visibility to the options.Simply providing visibility to the total possible projects in one place can add significant value. In addition, it’simportant to allow decision-makers to visualize their impact on the business strategy. Unfortunately, many companieshave very inefficient processes to collect and share this information. Consequently data is outdated, inaccurate andoften incomplete. How can companies make portfolio information more timely, useful, and visible? Provide a common view to all potential innovation investmentsDetermine a set of common metrics and characteristics that should exist in each initiative so it can becompared “apples to apples”Provide a view that maps the alignment of potential portfolio investments to the business strategyAllow decision makers the ability to see tradeoffs between investment opportunitiesProvide visibility to non-product oriented investments including research and development or technologyinvestments to make long-term roadmap decisionsProviding visibility is a critical first step. The most common challenge companies face in managing innovation andproduct portfolios, however, is the ability to make consistent, objective decisions. Too frequently decisions are madeon inadequate information, lack of direction results in no action, or politics and rank outweigh the facts. The vastmajority of companies have more ideas than they have resources to act on. It is hard, but incredibly important, todetermine the true financial potential of a particular investment. The good news, though, as Paul Heller of Sopheonexplains, is that “Best practices are well defined here. You a need cross-functional view and key stakeholderswith clear roles so they know their purpose in the evaluation.” How can companies develop a data-driven processto make objective decisions on which high value ideas they should pursue? Replace subjective decision-making with a clear understanding of potential product value, including theimpact of uncertainty and riskDevelop a set of clear, objective criteria to evaluate portfolio optionsPrioritize and evaluate portfolio opportunities against resource constraints to avoid overloading theexecution pipeline and causing “thrashing”Evaluate opportunities based on alignment with company strategy, ensuring an aligned balance of initiativesto objectivesAutomate and standardize portfolio data gathering to ensure timely, accurate data can be gather efficientlyMany companies fail to recognize – or at least enforce – that evaluation is an ongoing process. Many companies viewthe development of their approved ideas, proposals and projects as a just a phased plan instead of a decision-makingprocess. The result is they don’t stop projects and realign investments. Too few companies are willing and able to haltinnovation projects that are underway, even when it is clear that they will underperform expectations. It is importantto kill projects that won’t deliver their anticipated business value so limited resources can be reallocated to highervalue initiatives. This is critical because as Accenture’s The Innovation Death Spiral explains “Whether they turn outto be successful launches or complete failures, new offerings place equal burdens on a company’s operationalresources.” How can companies ensure that the projects they initially select will continue to be worth the investment? Extend the evaluation process through into execution with a meaningful, gated development process Ensure that gate meetings and decision makers use consistent, objective metrics and that their decisionscarry weight Have a standard process to kill underperforming projects and reallocate resourcesExecuteOf course all of the best ideas, proposals and business plans in the world are of no value unless they can be turnedinto a reality. The “Execute” sub-process takes the input from the previous processes and executes a formal project t
Processes for Innovation Management . Despite the importance of the innovation strategy, Capgemini Consulting Innovation Leadership Study indicates that only 42 percent of companies have an explicit innovation strategy. This is a common failing and should be addressed by corporate leadership.
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